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Investment and Tax Incentives

When planning to expand internationally, a significant number of countries now offer investment and tax incentives in the form of tax holidays, allowances based on capital expenditure, enhanced tax deductions, grants and other investment incentives to attract new industry or bolster growth industries. Research and development tax incentives, for example, are now offered by more than 43 countries.

Look for tax incentives, grants, subsidies and the availability of any other funds.  When considering national tax incentives, enquire as to restrictions on the type of business activities, how long the incentives will last, is approval required for eligibility, if so how long will approval take? The following is a very small sample of incentives currently available around the world.

Argentina is keen to promote an already quickly growing software industry, by offering a government incentive that provides software exporting companies a tax break of 70% of the employer’s share of payment to fund Argentina’s public benefit system.

Indonesia is preparing to implement a tax incentive to encourage foreign companies from repatriating profits.  The government plans to offer a tax incentive, which was hinted to be in the form of a dividend tax credit for funds reinvested in Indonesia.  This is in addition to the 5 – 10 year tax holiday that has been available since 2011 to companies making significant capital investments.

Malaysia is offering a 100% tax holiday for 5 years to high tech companies.  Manufacturing, food processing, hotel, tourism and other industrial and commercial companies a generous tax holiday of 70% tax exemption on statutory income for five years, and allows tax exemption for dividends paid from tax exempt income.  Your company may also qualify for an investment tax allowance.  And high tech companies may qualify for a 100% five year tax holiday.

South Africa offers a generous grant to attract investment and create employment in South Africa in the business process services sector.  The grant offers up to R112,000 per job created and sustained over a 3 year period, plus a bonus incentive for companies creating more than 400 jobs.  The jobs are a grant designed to attract, among other businesses, call centers.

Panama’s investment and tax incentives, together with its use of the U.S. dollar as its currency makes Panama very conducive to foreign investment.  Manufacturing companies that export more than 60% of their product are exempt from taxes on both raw materials imported and exports, provided they employ a minimum of 5 local workers.  Panama has tax and investment incentive programs for multinational companies that establish their regional headquarters in Panama, for   high-tech companies, research and development companies, and call centers.   Panama also waives withholding taxes on dividends and has a strong double tax treaty network.

When considering whether to take advantage of investment and tax incentives in any country examine a variety of options and countries.  Is the location in close proximity to the market for your goods, is the IT infrastructure sound and sufficient for your use, are there protections for foreign investors, to what extent, if any, is the local government willing to invest in your company, is there a pool of local skilled workers?   You may find an investment and tax incentive program that bolsters your company’s ability to profit quickly from expansion.

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